Intangible Investment and Economic Growth in Japan - PowerPoint Presentation

Slide1

Intangible Investment and Economic Growth in Japan

Presented at the 3

rd

World KLEMS Conference at Tokyo on May 19

th

Tsutomu

Miyagawa

(

Gakushuin

University and RIETI)

Konomi

Tonogi

(Kanagawa University)

Shoichi

Hisa

(Kanagawa University)Slide2

IT industries and Intangibles in Japan

Jorgenson, Ho, and

Stiroh

(2005),

Inklaar

,

O’Mahony

and

Timmer

(2005),

Fukao

, et al. (2012

): IT industries are key sectors of economic growth in advanced countries.

In Japan, the value added growth

and TFP growth in the IT industries have surpassed those in non-IT industries.

The growth strategies in Japan have strengthened the utilization in IT.Slide3
Slide4

IT industries and Intangibles in Japan contd.

The Economic

Report of the President in the US in 2007

emphasized complementarities between IT investment and intangible investment.

Corrado

,

Hulten

and

Sichel

(2009) (hereafter

referred

to as CHS

) measured

aggregate

intangible investment in the US.

Following their approach,

we measure the

aggregate intangible investment

in

advanced countries.

However, to examine the complementarities between IT investment and intangibles, we need to measure intangible investment by industry.

→

Chun et al. (2012),

Miyagawa

and

Hisa

(2013),

Niebel

et al. (2013), Crass et al. (2014).Slide5

The Measurement of Intangible Investment by Industry in Japan

Following the CHS approach, we extended the intangible investment series developed by Chun et al. (2012) and

Miyagawa

and

Hisa

(2013) to 2010 by using the JIP database and other primary statistics.

The current version of intangible investment data

can be found at

the

following

website: http

://

www.rieti.go.jp/en/database/JIP2011/index.html#04-6.Slide6

The Measurement of Intangible Investment by Industry in Japan contd.

Revised points of 2014 version of Intangible Investment data.

As JSNA started to publish

data

on own account software investment as well as custom and packaged software investment, we use the JSNA data to construct computerized information as

much

as we can.

Copyright and license costs

→

Entertainment and artistic

originals.

Slide7

The Measurement of Intangible Investment by Industry in Japan contd.

The amount of intangible investment in the 2000s is about 40

trillions of JPY

.

It has declined since the

Leaman

Shock. In particular, investment in economic competencies has declined since 2000, due to the harsh restructuring

that occurred after

the financial crisis in Japan.

Intangible investment in the IT industries

accounts for

over 60% of

total

intangible investment.Slide8

Estimated Intangible Investment in JapanSlide9

Comparison of Intangible Investment between Japan and Korea

The ratio of intangible investment to GVA in Japan is greater than

Korea

.

However, the gap

between

Japan and Korea has contracted since 1990.

In some service industries, the intangible investment/GVA ratios in Korea have surpassed those in Japan. In particular, investment in computerized information in service industries is greater than that in Japan.Slide10

Intangible Investment/GVA Ratio in Japan and Korea Slide11

Intangible Investment/GVA

Ratio by Industry in Japan and KoreaSlide12
Slide13
Slide14

Capital Stock in Intangibles in Japan

When we construct capital stock in intangibles

using the

perpetual inventory method, we use two types of depreciation rates; the first type follows

Corrado

et al. (2013) and the second type is measured from our own survey on intangibles.

As Japanese firms expect

stock

in innovative property

to deteriorate

rapidly, depreciation rates of assets in innovative property are larger than those measured by

Corrado

et al. (2013).Slide15

Depreciation rates for intangible assetsSlide16

Capital Stock in Intangibles in Japan contd.

The amount of intangible assets in Japan is 167 trillions of JPY, when we use

the depreciation

rates developed by

Corrado

et al. (2013).

However, the amount of intangible assets using alternative depreciation rates is 124 trillion of JPY in 2010 due to the decrease in assets in innovative property.

In both cases, the growth rate in capital stock in intangibles has slowed down since 1990. In particular, the growth rate in economic competencies turned negative in the 2000s.

In some service industries, the growth rates in intangibles also turned negative in the 2000s.Slide17

Capital Stock in Intangible Assets in Japan (

Corrado

et

，

al.’s case)Slide18

Capital Stock in Intangible Assets in Japan (based on the Japanese survey)Slide19
Slide20

Growth Accounting with Intangibles

When we conduct growth accounting with intangibles, the role of intangible assets on economic growth has increased since 1995.

In particular, accumulation in intangibles plays

a key role in economic growth in the service sector and the IT industries.

We find that the effects of intangibles on economic growth are concealed in capital accumulation and TFP growth in

traditional

growth accounting.Slide21

Growth Accounting with Intangibles and a Traditional Growth AccountingSlide22

Growth Accounting with Intangibles contd.

International comparison of growth accounting shows that the contribution of intangibles to labor productivity growth in Japan is the lowest in advanced countries.

The growth strategy in

Abenomics

published last year emphasized that the government

supports

investment in tangible assets aggressively.

However, the Japanese government should

support

intangible as

well as tangible investment to restore the Japanese economy through change in industrial structure.Slide23

International Comparison of Growth AccountingSlide24

Thank you for your attention!